DOL v. Jani-King of Oklahoma, Inc.

A business may call someone a “franchise owner” or an “independent contractor,” but those labels do not control whether the person is an employee under the Fair Labor Standards Act (FLSA). In a recent decision involving Jani-King of Oklahoma, Inc., a federal court applied the FLSA’s “economic realities” test and concluded that the company’s janitorial franchise owners were employees—not independent contractors—for purposes of the Act’s recordkeeping requirements.

The ruling is an important reminder for employers using franchise, contractor, or other nontraditional work arrangements: the actual working relationship matters more than the contract title. It also offers employees a useful framework for evaluating whether they may have been misclassified.

Case Background

The U.S. Department of Labor sued Jani-King of Oklahoma (JKO), a regional franchisor that sells janitorial franchises and provides commercial cleaning services. The Department alleged that JKO improperly treated certain franchise owners as nonemployees and failed to meet the FLSA’s recordkeeping obligations.

JKO marketed cleaning services, entered into customer contracts in its own name, and retained ownership of customer accounts. It then offered franchise owners the opportunity to perform cleaning work for those accounts.

The franchise owners could sometimes perform the cleaning themselves, with family help, or through workers they hired.

Both sides sought summary judgment, meaning they asked the court to decide the case without a trial based on undisputed facts.

The Key Legal Question: Employee or Independent Contractor?

The central question was whether the franchise owners were economically dependent on JKO or were genuinely operating businesses of their own. The FLSA uses an expansive definition of employment, and courts look beyond contractual labels to the real-world relationship between the company and the worker.

The court used the familiar six-factor economic realities test:

• How much control the company has over the work;
• The worker’s opportunity for profit or loss through business decisions;
• The worker’s investment compared with the company’s investment;
• The permanence of the relationship;
• Whether the job requires specialized skill; and
• Whether the work is integral to the company’s business.

No one factor automatically decides employee status. Instead, the court must consider the total circumstances of the working arrangement.

Why the Court Found an Employment Relationship

1. JKO Exercised Substantial Control

The court found that JKO exercised significant control over franchise owners’ access to work and the manner in which that work was performed. JKO controlled admission to and termination from the franchise system, chose which franchise owners would be offered customer accounts, and could remove them from accounts.

JKO also established cleaning schedules and performance standards, conducted quality-control inspections, and could remove a franchise owner when work did not meet its standards or a customer complained.

The court also emphasized that franchise owners were barred from performing commercial cleaning work for non-JKO customers during the franchise agreement and for two years afterward.

2. Franchise Owners Had Limited Control Over Profit and Loss

Although franchise owners could control some expenses and occasionally seek additional work, JKO controlled the most important economic terms. It handled customer contracts, bidding, pricing, billing, and the payment process.

Customers paid JKO, which deducted fees and costs before paying the franchise owner the remaining amount.

As the court saw it, the franchise owners’ ability to increase profits through independent business initiative was restricted because they could not independently negotiate the price or scope of work with customers.

3. Investment Did Not Outweigh the Other Evidence

The franchise owners did make investments, including franchise fees, equipment, supplies, payroll, taxes, and insurance.

But the court found that their investments were modest in comparison with JKO’s overall investment and noted that some costs could be deducted from the franchise owners’ compensation.

That economic structure resembled payment for labor more than an independently operated business, according to the court.

4. The Relationship Was Long-Term and Exclusive

The franchise agreements lasted ten or twenty years, and franchise owners were effectively restricted from taking commercial cleaning work outside the JKO system.

The court concluded that this continuous and exclusive relationship supported employee status.

5. Commercial Cleaning Did Not Require Specialized Skills

The court found that commercial cleaning can be demanding, but it did not require the type of specialized skill that typically points toward independent-contractor status.

JKO’s required training did not change that conclusion because the training developed basic job skills rather than a specialized professional trade.

6. Cleaning Work Was Central to JKO’s Business

Finally, the court found that cleaning services were an integral part of JKO’s business. JKO marketed commercial cleaning, secured the customer accounts, negotiated and signed the cleaning contracts, and sometimes performed cleaning services directly when a franchise owner was unavailable.

That factor strongly supported treating the franchise owners as employees.

The Court’s Decision

The court granted summary judgment to the Secretary of Labor and denied JKO’s competing request for summary judgment.

Looking at the full relationship, the court held that the franchise owners depended on JKO for the opportunity to perform cleaning services and therefore were employees under the FLSA.

Because JKO was an employer under the FLSA, the court ruled that it had to comply with the statute’s recordkeeping requirements.

The court permanently barred JKO from failing to keep accurate records concerning employees’ wages, hours, and working conditions.

What This FLSA Misclassification Decision Means

This case does not mean that every franchise owner is automatically an employee. The analysis remains fact-specific, and the court acknowledged that JKO’s franchise owners had some features commonly associated with independent contractors, including the ability to reject contracts, own franchise entities, buy supplies, make an initial investment, and hire others.

But the decision reinforces several practical points:

For Employees and Workers

• A contract calling you a franchisee or independent contractor does not necessarily decide your legal status under the FLSA.
• Your degree of economic dependence matters, including who controls customer relationships, pricing, payment, schedules, and the ability to work for others.
• Employee status may affect rights to minimum wage, overtime compensation, and accurate payroll and hour records. The court noted that required FLSA records include payroll and records concerning minimum wage and overtime pay.

Bottom Line

The Jani-King decision illustrates a foundational principle of wage and hour law: an arrangement can be labeled a franchise opportunity, but still be treated as employment under the FLSA when workers are economically dependent on the company that provides and controls the work.

Workers who have been classified as independent contractors, franchisees, or business owners—but whose work is closely controlled by another company—should carefully review the actual terms and day-to-day reality of the relationship. Employers using these models should likewise assess their practices, classification decisions, and recordkeeping before a dispute or government investigation arises.

Click DOL v. Jani-King of Oklahoma, Inc. to read the full Order.